If I had a penny for every time I heard a friend swear they were going to get out of debt, I’d be rich. I usually find that this time of the year has them giving up on their goal altogether. In fact, they’re on to new goals like buying stuff they can’t afford or eating out several times a week. Sound familiar? If so, check the 5 reasons you’re still in debt.
1. You Ignore Your Reality
One of the biggest reasons people stay in debt is due to their unwillingness to face the music. Sit down and make a tally of everything you owe. Yes, I can only imagine how bad this sucks. But you can’t make progress if you don’t know where you’re starting. Sort all of your debt by categories like collections debt, medical debt, student loan debt, and credit card debt. Now, decide which one you’re going to pay off first. It’s a personal decision where to start, but my money would be on paying off any debts that are already delinquent and in collections.
2. You Live Beyond Your Means
Now this is one that contributes the most to your money troubles. I’ve seen a person cry about being dead broke, but shows up with a brand new $200 smart phone and car that they can’t afford the payments on. These individuals purchase things under the guise that they “deserve it”, but if you put it into the right context…they are saying they deserve to be in debt. To fight this trap, take some time to figure out how much money you earn and how much money you spend in a given month. Sites like Mint.com can help you with tracking your money and expenses. It also keeps you accountable because it will send you an email detailing how you went over-budget.
3. You’re the King or Queen of Minimum Payments
You will never rid yourself of debt by making the minimum monthly payments. Repeat – You will never rid yourself of debt by making the minimum monthly payments!!! If you owe $3,000 on a credit card and are paying the minimum amount, you could take over three years to pay off that debt. Do yourself a favor and apply a few extra dollars on your bill. There are plenty of debt payoff calculators that can help you determine how much money you should pay in order to rid yourself of debt. Here’s a good calculator to get you started… http://money.cnn.com/calculator/pf/debt-free/.
4. You Shop on Pure Emotions
We’ve all been there. You have a tough day and suddenly those fab pumps in the shoe display case at Nordstroms become must-haves! Some people eat a bunch to bury stress while others spend money. If you fall into the latter category, come up with a way to delay your purchases until you’ve had some time to settle down and process your feelings. Odds are you won’t feel the same way about the purchase after a good night’s rest.
5. You fail to plan
Paying off debt is not easy. However, a lot of people claim they are going to do so without a real plan in place. Calculate your monthly expenses, debt, and income to determine how much you really can put towards becoming debt free. Then make a deadline for paying off all your debts. Experts say you should plan on paying off your debt in 36 months or less. Now this may or may not be possible if you are paying down student loans, but make a plan to at least pay off consumer debt in that amount of time.
Tackle these five obstacles and you’ll find yourself debt free in no time! Stay tuned for money advice for the month of March on ANN+JANE!